How large is the tax-free allowance in Estonia in 2026?
€700 a month — and for the first time it is the same for everyone. From 1 January 2026 the “tax hump” disappears: the old sliding system, in which the allowance shrank as income rose, has been abolished. A single tax-free allowance of €700 a month now applies — €8,400 a year — to everyone of working age, whatever they earn. For old-age pensioners the allowance is €776 a month, or €9,312 a year, likewise independent of income. The income tax rate stays at 22%, as in 2025. The practical effect: an end to the nasty surprises where a bonus or extra work cut your allowance and the tax return showed an unexpected bill.
📋 The rules
- Tax-free allowance: €700 a month
- Per year: €8,400
- It applies to everyone, whatever the pay
- Pensioners: €776 a month
- Income tax rate: 22%
🔓 Exceptions
- Old-age pensioners have an allowance of 776 euros a month, or 9,312 a year
- To have the allowance applied you must file an application with your employer
- With several employers the allowance may be applied in one place only
⚠️ Penalties & fines
The allowance does not apply itself — you have to file an application. If you have not applied to your employer, income tax is withheld from your whole salary, and you get the money back only through the tax return — an interest-free loan to the state for a whole year. The second trap is having several employers: the allowance may be applied in one place only. File with two employers and it is counted twice, and in April you will owe the difference. The good news: from 2026 you no longer have to calculate how much allowance “survives” at your salary level — it is €700, full stop. Still, check in January that your employer has applied the new figure.
📎 Official sources
- Tax and Customs Board · Basic exemption →
- Ministry of Finance · Tax changes →
- Riigi Teataja · Income Tax Act →
❓ Frequently asked
How large is the allowance?
From 2026 the tax-free allowance is 700 euros a month, or 8,400 euros a year, and it applies to everyone of working age regardless of income. The earlier sliding system has been abolished.
What was the tax hump, and has it gone?
The tax hump was the system in which the allowance shrank as income rose. From 1 January 2026 it disappears and a single allowance of 700 euros a month applies to everybody.
What is the pensioner's allowance?
For old-age pensioners the tax-free allowance is 776 euros a month, or 9,312 euros a year, and it does not depend on income, as in 2025. It is higher than the ordinary allowance.
Does the allowance apply automatically?
It does not. You must file an application with your employer. Without it, tax is withheld from your whole salary and the overpayment comes back only through next year's tax return.
What if I have two jobs?
The allowance may be applied at one employer only. If you file with two, it is counted twice and you will have to pay the difference back to the state through your tax return.
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